Tax breaks, SpaceX hopes spur shift from Tesla

Net buying of Tesla shares by Korean investors falls 71 percent, asset managers race to launch SpaceX ETFs

South Korean retail investors have cut their holdings in Tesla this year, taking profit and rebalancing portfolios as anticipation grows for a potential initial public offering of SpaceX and as new tax incentives encourage a shift back into domestic assets.

Data from the Korea Securities Depository showed that South Korean retail investors, known locally as "Western ants," sharply scaled back their purchases of Tesla shares this year. Net buying of Tesla fell about 71 percent from a year earlier, dropping more than $2.6 billion last year to around $779 million as of last Friday.

The shift reflects profit-taking and a broader portfolio rotation by retail investors, industry observers say.

Interest is meanwhile building in SpaceX's planned IPO, which could be one of the largest globally this year, with fundraising of up to $75 billion.

The portfolio shift has been reinforced by a new tax incentive aimed at drawing overseas investment funds back into the domestic market. Under amendments passed by the National Assembly on March 31, South Korean investors who transfer proceeds from overseas stock investments into domestic equities by May can receive up to a 100 percent deduction on capital gains taxes.

Data from Samsung Securities showed that assets in its Reshoring Investment Accounts surpassed $75 million within two weeks of launch. The RIA is a tax-incentivized account to encourage investors to repatriate funds from foreign stocks, particularly US stocks, into domestic equities.

Nvidia and Tesla accounted for a large share of inflows into the accounts, suggesting retail investors are reallocating holdings previously concentrated in US technology stocks.

Market participants said some investors are also looking to redirect proceeds from overseas stock sales into domestic aerospace-themed exchange-traded funds, in part to gain indirect exposure to SpaceX ahead of its potential listing.

Reflecting this trend, South Korean asset managers are rolling out related products such as US aerospace-themed ETFs ahead of the listing to attract retail investors seeking exposure to SpaceX.

Mirae Asset, Korea Investment Management and Shinhan Asset Management are among firms preparing new products, while Samsung Asset Management has already attracted about $175 million into its aerospace ETF launched last month.

SpaceX has confidentially filed for an IPO with the US Securities and Exchange Commission and could go public as early as mid-June, with a valuation of more than $1.7 trillion.

Analysts say the listing could trigger a broader rerating of the global space sector and boost passive inflows if it is added to major indexes such as the S&P 500.

Separately, Mirae Asset Securities is weighing ways to offer SpaceX shares to South Korean retail investors in what could be the first dual offering in the United States and Korea.

However, regulatory uncertainty remains in Korea. Differences in IPO rules and disclosure requirements between the two countries could complicate the process.

The Financial Supervisory Service is reviewing potential risks to investor protection and foreign exchange markets. Industry sources said limiting allocations to institutional investors remains a fallback option if retail participation proves difficult.